To remain affordable, Chinese manufacturers are relocating.

With a workforce that is increasingly expensive and rare, Chinese automakers are now setting up their factories abroad.

Thailand, Indonesia, Vietnam… There is no time to lose. The Chinese automotive industry is booming, and there are positions and market shares to regain, while pushing out American, European, and Japanese firms. This is a deep geopolitical effort where China seeks to establish its hegemony over the Asia-Pacific region.

To achieve this, it is necessary to extend its sphere of influence and network as much as possible. Establishing factories abroad, in certain influential countries, is a form of subordination. It provides jobs in countries severely hit by unemployment… and allows for cheaper production.

Because China is at a crossroads in its history: wages continue to rise, the workforce is becoming scarcer despite a deep crisis in construction, such that its status as the “world’s factory” is starting to falter. Producing certain goods there is no longer the most cost-effective option. In Shanghai, the average salary reached 1355 euros in 2023. This is still lower than in Europe, but once customs fees, maritime transport, freight delays, etc., are taken into account, the relevance diminishes.

A risky relocation?

The idea of relocation – BYD will open factories in Thailand and Indonesia in 2025 – is good for gaining acceptance in these new markets that are still not very open to electric cars. But what about quality, already a major issue for the Chinese industry known for offering cheap junk? We must not let the automotive sector follow the same trajectory as a scooter or a smartphone. The industrial failure would be gigantic.

In the meantime, this unprecedented price war in the electric vehicle market in China forces companies to find solutions to lower prices and other production costs. This is in stark contrast to the European and American approaches where manufacturers ensure comfortable operating margins and extreme quality products.

Who will be right in the long run? Discounting is a threat, and it is up to Europe and the United States to know how to curb it early enough.

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